Bank of Canada slashes growth outlook

OTTAWA (Reuters) - Canada's central bank chief entertained
the possibility of a U.S. recession and warned on Thursday that
global policymakers have some "very hard work" ahead of them to
resolve financial market troubles.

David Dodge, who steps down as Bank of Canada governor at
the end of this month, also said Canada's economy would slow
sharply as U.S. demand for its exports wavers, justifying the
need for further "measured" interest rate cuts in Canada.

But he said Canada also has unique advantages that would
keep it out of recession. The bank sees Canadian growth
slipping to 0.6 percent in the first quarter, down from a
previous estimate of 2 percent, but then picking up speed later
in the year.

In its quarterly monetary policy report, the bank slashed
its U.S. growth outlook for the first half of this year to an
annualized 0.5 percent and to 1.5 percent for the full year,
down from 2.1 percent previously.

But Dodge said repeatedly said that best guess could easily
be proven optimistic as events unfold.

"Could U.S. growth be lower than half-a-percent? Could it
be negative-half, or negative-1 percent in the first half?
Sure," Dodge told reporters.

Two quarters of economic contraction would constitute a
recession but Dodge stressed that the bank's forecast was not
necessarily "cooked up with a huge degree of precision."

"This is a very weak U.S. economy and if you look at U.S.
final domestic demand, which is really important for us here in
Canada, because that's what's determining how many imports they
are going to take in, U.S. final demand is actually weaker than
that 0.5 percent."
Continued...